The Reserve Bank of Australia’s growing unease of the risks of a “speculative” housing market surge has been undermined by Treasurer Joe Hockey, who has again dismissed the idea that a property bubble is forming.
With Reserve Bank board members escalating their warnings on Tuesday about the dangers of rapid price gains – declaring current trends warranted “close observation – Mr Hockey said the notion that households and investors were taking on too much debt to buy houses was wrong.
“I’m not so sure it’s credit-fuelled,” he said during a forum organised by Bloomberg News in Sydney on Tuesday. “There’s a lot of cash going into property now.”
The remarks come just two days after the Basel-based Bank for International Settlements said the housing market was one of the world’s most overvalued, based on a series of metrics, and coincided with the minutes of the Reserve Bank’s September meeting, in which board members explicitly highlighted that they are now on high-alert for a potential bubble.
The bank’s board members said a further surge in “speculative demand” by investors could amplify the recent rise in property prices and increase the likelihood of subsequent falls.
“The main risks in such a scenario would likely be to the stability of the macroeconomy rather than the financial system, particularly if households were to react to declines in their wealth by cutting back on their spending,” they said in the minutes.
The bank left the official cash rate at a record low 2.5 per cent two weeks ago for a 12th straight meeting, saying current settings were supporting parts of the economy.
However, in a pointed warning about a potential overheating of the housing market, they said “policy also needed to be cognisant of the risks to future growth that could accompany a large further build-up in asset prices, particularly if that was associated with an increase in leverage.” First sign of ‘alarm’
The blunt remarks, which indicate the board may be starting to consider whether interest-rate hikes are needed to take some heat out of the market, pushed the Australian dollar higher to US90.46¢ from US90.38¢.
“This is the first time we have seen the bank show genuine alarm at the recent lift in house prices,” said Westpac chief economist Bill Evans, one of the nation’s most experienced central bank watchers.
“This concern with house prices and leverage is emphasised where the Board notes that credit growth for investor housing is now running at around 10 per cent per annum and the Board emphasises that investor credit has been a particularly strong component of the recent lift in housing credit.”
Adam Boyton, a senior economist at Deutsche Bank, said the minutes might mark the start of a new jaw-boning campaign by the central bank to remind investors that house prices can and do fall.
“We would also not be surprised if any such jaw-boning was accompanied by a more public debate about macro-prudential measures – albeit not ones designed to restrict the flow of credit per se, but measures aimed at ensuring the allocation of credit remains ‘prudent’,” Mr Boyton said.
Describing claims of a bubble as “lazy analysis,” Mr Hockey said that rising home prices were just a reaction to a lack of supply, and that recent gains in dwelling construction - much of it the result of foreign investment - in Sydney, Melbourne and Brisbane would help address that shortage.
“Australia fundamentally doesn’t produce enough houses to meet demand,” the Treasurer said.
Well thank you Team Obvious, unfortunately it will take more then minutes from the RBA to wake the ignorant housing Zombie masses, the crash will do that however...
Hockey you just lost any shred of creditability you might have had you stupid creature
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
Well thank you Team Obvious, unfortunately it will take more then minutes from the RBA to wake the ignorant housing Zombie masses, the crash will do that however...
Timo! Welcome back! I was starting to worry you'd gone and bought an investment property, or something...
Timo! Welcome back! I was starting to worry you'd gone and bought an investment property, or something...
Too smart for that, but thank you for your concern,,pop!
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
Looks like the face you make when inserting a Valium suppository after reading articles like this
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
The RBA is not growing uneasy. The RBA wants higher house prices. High house prices enable homeowners to borrow money to start or expand a small business. The RBA wants to create an entrepreneurial culture in Australia. For the RBA, it's not about slowing capital growth. It's all about ensuring capital growth.
The RBA is not growing uneasy. The RBA wants higher house prices. High house prices enable homeowners to borrow money to start or expand a small business. The RBA wants to create an entrepreneurial culture in Australia. For the RBA, it's not about slowing capital growth. It's all about ensuring capital growth.
Yes doc, they tried to do the same in the US and euro too and we copied their ways down to a tee. But we can now see what a compete failure it is. They have no solutions , just more and more debt and keep rates at zero for six years.
Lucky for us in 2008 we were employing flat out thanks to the chinese counterfeiting boom, while the US and euro were putting off jobs in record numbers as they did not have the mining we did to hold us up.
Buts that alls comimg to an end, unemployemnt surging , wages dropping, rents dropping and the economy now on a permanent decline like all other western economies.
Dont you understand doc, that our jobs are heading overseas becuase of the rise in cheap asain labour over the last ten years. It is swallowing our jobs up and we and other western economies have never had to deal with this on a scale like we do now. Until wages are more closely matched, this will continue indefinately, can you not see and understand this doc. The other major modern threat to jobs is technology and computerised automation. Its amazing all you dopes never comment on the reality here and steer well clear, its the basis for our economy and is all you really need to know in the end referring houses prices.
Just like overseas, all the dopes thought everything was fine and that house prices would not collapse, that is can not happen, is just doom and gloom speak. This is the shit they fed people, the lies they fed idiots who believed this shit.
But then it all collapsed and is still going strong six years later.
Even now after seeing all this, dopes sit here jibbering the same shit these dopes did before it collapsed, because they were simply to stupid to see the obvious even thought it was all around them and explained clearly to them before hand.
Then when it happens, the feckwits come out with, ' nobody saw it coming'.
The truth often is! I hope all the numbskulls venturing into over priced property on interest only loans have a good sense of humour....they'll need it
Dr Watson
16 Sep 2014, 09:16 PM
The RBA is not growing uneasy. The RBA wants higher house prices. High house prices enable homeowners to borrow money to start or expand a small business. The RBA wants to create an entrepreneurial culture in Australia. For the RBA, it's not about slowing capital growth. It's all about ensuring capital growth.
Is this rant something from a Psychotic's dream? House prices starve the real economy of capital, not enable it.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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